2017 (4) TMI 986 - AT - Central Excise

Entitlement to exemption - N/N. 10/97-CE dated 1.3.1997 and 3/2004 dated 8.1.2004 - clearance of PVC insulated wires and cables, power cables, etc - penalty u/s 11 AC - Held that - except for recognition of in-house R &D Unit of the consignee, there is nothing on record that the required certificate from the competent officer of the Department of Scientific and Industrial Research, Government of India, has been obtained for such supplies of duty free excisable items. This is an essential condition which has not been fulfilled by the appellant and as such, they are not eligible for exemption under the said notification. Benefit of N/N. 3/04-CE - Held that - It is apparent that N/N. 3/04-CE applies to all kinds of excisable products in a broad category as listed in the notification. There is no tariff classification nor there is any specific machinery or instrument or appliances identified by name. In such situation, denial of exemption to the appellant is not justifiable. Penalty - Held that - there is no justification for imposing equal amount of penalty on the appellant. The show cause notice did not allege or invoke extended period of demand and there is no charge regarding specific violation of various provisions of law attracting such equal penalty - penalty set aside. Appeal allowed - decided partly in favor of assessee.

Summary

Issues:
1. Entitlement to exemption from central excise duty under Notification No.10/97-CE and 3/2004-CE.
2. Imposition of penalty under Section 11 AC.

Analysis:

Issue 1: Entitlement to Exemption under Notification No.10/97-CE:
The appellant claimed exemption under Notification No.10/97-CE for wires and cables supplied to a recognized R & D unit. However, the tribunal found that the essential condition of obtaining a certificate from the competent officer of the Department of Scientific and Industrial Research, Government of India, was not fulfilled. The exemption was denied as the appellant failed to prove compliance with the requirement that the institution is not engaged in any commercial activities and that the goods are solely for research purposes. Thus, the appellant was deemed ineligible for exemption under this notification.

Issue 1: Entitlement to Exemption under Notification No.3/2004-CE:
Regarding the appellant's eligibility for exemption under Notification No.3/2004-CE for setting up water supply plants, the tribunal noted that the denial of exemption based on the cables being in running lengths was unjustifiable. The tribunal highlighted that the exemption covers all items of machinery and components required for setting up water supply plants. It was emphasized that the exemption applies broadly to various excisable products without specific identification by name or tariff classification. The tribunal disagreed with the previous decision that relied on a Supreme Court case, clarifying that the exemption under consideration was not limited to specific machinery or components. As the cables were certified for the water supply project and were integral to the setup, the denial of exemption was deemed unjustifiable.

Issue 2: Imposition of Penalty under Section 11 AC:
The tribunal found no justification for imposing an equal amount of penalty on the appellant. It was noted that the show cause notice did not invoke an extended period of demand or specify violations warranting such a penalty. The penalty was imposed without invoking the relevant provisions or providing reasons for its application. Consequently, the tribunal set aside the penalty, emphasizing that there was no legal basis for imposing such a penalty in the absence of specific charges or justifications in the show cause notice.

In conclusion, the tribunal disposed of the appeal by ruling against the appellant's entitlement to exemptions under the mentioned notifications and setting aside the imposed penalty under Section 11 AC. The central excise duty liability was to be recalculated after adjusting the amount already paid by the appellant in accordance with the Cenvat Credit Rules, 2004.